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Marketing in a Recession: Marketing in a Recession Tera Johnson Chrysalis TCF, LLC
Introduction: Introduction Recession? Recovery? The upcoming macro-environment – what it’s likely to mean for the dairy foods industry Making the case for brand expenditures Tactical adaptations for our current environment
I’ve heard the recession is over, or there never was one…: I’ve heard the recession is over, or there never was one… More optimism about the economy in the last week than in the last months Factory orders are up for the first time in 18 months The index of purchasing managers is up to 55 Consumer spending was up 1.2% in January The financial markets are up
The New Debate: What will the Recovery Look like?: The New Debate: What will the Recovery Look like?
Now for the Bad News…: Now for the Bad News… Not all sectors have been hit equally; not all sectors will recover equally Consumers have funded their continued spending with unsecured debt Global overcapacity in many industries High dollar relative to most other currencies Adds up to continuing price pressure on US corporate profits – Greenspan predicting a “gradual recovery”
The Mixed Picture in the Dairy Foods Industry: The Mixed Picture in the Dairy Foods Industry Food service hit by 911 and recession; cocooning homebodies have been eating more snack foods and frozen foods in particular Dairy foods exports were up in 2001 for cheese varieties, whey protein concentrate, lactose, ice cream and yogurt; fluid milk and dry whey were down Volatile markets pressured profits in companies with weak brands; companies with strong brands were able to increase prices
What Will the Recovery Hold?: What Will the Recovery Hold? Structural issues for dairy foods industry not likely to change with recovery Global markets will offer more opportunity and more competition for US manufacturers The US dollar is likely to remain strong Price pressure will make it difficult for domestic manufacturers to increase prices in the absence of strong brands Rate of profit recovery likely to be subdued
Making the Case for Marketing Spend will Continue to be Tough: Making the Case for Marketing Spend will Continue to be Tough Our biggest challenge is persuading bottom-line oriented, non-marketing executives of the value of a sustained branding effort
Have You Ever Felt Like This???: Have You Ever Felt Like This???
So why do we end up like the “Out-of-towner”…?: So why do we end up like the “Out-of-towner”…? We use the wrong arguments when we make our pitch: We haven’t convinced executive management of the strategic value of our brands We make our case based on market share gains instead of increased profitability We talk about marketing expenditures instead of investments in brand equity
Making The Case for Branding to A Non-Marketing Executive: Making The Case for Branding to A Non-Marketing Executive How Marketing People Talk about Brands: Symbolic Communication tool Spending Brand awareness Market share How We Need to Talk About Brands: Strategic Asset for the Company Investing Brand equity Profits
Why Marketing Values Brands: Why Marketing Values Brands Brands are a concise way to convey meaning, a relationship, and a value proposition in a media saturated world Brands are a promise to customers
Why CEO’s Value Brands: Why CEO’s Value Brands Brands create differentiation and customer loyalty, make it easier to launch new products, maintain and increase margins and profits Brands are considered intangible assets when a company is valued for merger or acquisition Historical evidence suggests that companies with strong brands trade at higher multiples than companies with weak brands Strong brand = strategic asset = $$$
Key Marketing Arguments for Continued Spend in a Weak Economy: Key Marketing Arguments for Continued Spend in a Weak Economy Competitors tend to cut spending, creating contrarian opportunities: Maintaining promotional spend will sustain or even grow market share Stealing share of mind is a bargain during a recession Consumers don’t “go away” during a recession, they grow more conservative: Opportunity for new entrants to encourage brand switching to cost-saving alternatives
There’s Plenty of Evidence-AAAA Report: There’s Plenty of Evidence-AAAA Report An AAAA study, “Advertising in a Recession”, cites a number of other studies that document a strong correlation between sustained spending and increased market share
Profit Impact of Marketing Strategy (PIMS) Study: Profit Impact of Marketing Strategy (PIMS) Study In 1999, PIMS conducted a study of 183 UK-based companies that compared advertising spend during recessions to share and profit gains during recovery – those that spent in recession did better afterward than those that did not.
Historical Examples of Brand Switching in Recession: Historical Examples of Brand Switching in Recession Sears stole the market from Wards during WW2 Kellogg beat Post during the depression Revlon and Phillip Morris gained share in 70’s recession while Avon and Hershey lost share Taco bell and Pizza Hut stole share from McDonalds during 90-91 recession In 2001, Breeze increased its GRP by 47% and increased sales by 20% while Lux decreased spend and sales declined
Who is Being Aggressive Now?: Who is Being Aggressive Now? Sprite came out of now-where in the past few years, up roughly 2.5% annually. Corona’s up 38%, and Budweiser 31% Saturn, and GM in general, stealing share from domestic rivals
Key Senior Management Arguments for Continued Spend in a Recession: Key Senior Management Arguments for Continued Spend in a Recession “Building brand equity is like building a retirement fund” The best way is through a sustained effort Returns to the investments take time to realize Returns are cumulative – they compound
Implications: Implications Don’t follow the herd to below average returns Cuts in brand investments during a recession have a cumulative negative impact on the long-term value of a brand Recessions are an opportunity to dollar cost average to improve your long-run returns
Do More and Tell Senior Management: Do More and Tell Senior Management Push manufacturers coop advertising programs Negotiate hard with media reps for lower rates, remnant space, volume discounts Consolidate media and force bidding by vendors Keep track of your savings and sales results and communicate your successes to those above you
Use the Opportunity to Refocus Your Marketing Strategy: Use the Opportunity to Refocus Your Marketing Strategy Are there new target markets you need to reach? Do you need new promotional media and methods to reach them?
What to do with Positioning: What to do with Positioning Adjust your positioning to the new environment – conservatism, comfort foods, patriotism Concentrate ads on core values and keep the message consistent
In Conclusion: In Conclusion Remember this is all about selling the value of branding to your company Present the benefits of branding, in a recession and otherwise, in financial terms Convey a willingness to be held accountable to deliver measurable results Demonstrate increased cost-effectiveness of marketing spend

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